Mindspeed Technologies (MSPD) is looking for strategic alternatives to bring in some extra capital into the company, and the stock recently saw an increase of about 30%, leading Steve Smigie, Analyst at Raymond James & Associates, Inc., to downgrade the stock to a “market perform” rating.
“Typically, you see a 30% premium for a company that will be taken out, so given the jump and what’s going on with the balance sheet, I decided to make the downgrade, though there are lots of alternatives they can do there. So our ‘market perform’ isn’t saying that there is no upside to the shares. My rating is about the company as it stands today with their issues. I think, however, if you were to do to a sum-of-the-parts analysis, there is room for the parts to be worth more if they were to be sold separately,” Smigie said.
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Smigie says Mindspeed was hoping to get a significant increase in small cells, although the technology seems to be getting pushed out to a certain extent, leading to a re-evaluation of the company strategy.
“Essentially, Mindspeed announced that they are looking for strategic alternatives. They had been hoping to get a pretty big ramp in small cells. We think they have a very good technology there, but at the same time, small cells are getting pushed out a little bit, too. Given their balance sheet, I think they made the decision that they want to evaluate some strategic alternatives, either for the company as a whole or in terms of certain businesses, to bring in some more cash,” Smigie said.
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